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Colorado Property Tax Alert: Residential Assessment Ratio Change

Colorado counties reassess property values every odd number year at “market value,” which is technically called “actual value” and will remain the same in the even number year known as the intervening year. This is true unless there are physical changes to the improvements as of January 1st (lien date) of the relevant year. Values are published each year on May 1st with a value appeal deadline on June 1st.

In Colorado, there are different assessment ratios for commercial property (29%) and for residential property (7.96%). The commercial ratio is a constant, at 29%, as set in the Colorado Constitution; however, in 1982, Colorado voters determined that 55% of all property tax revenue collected statewide should be paid by commercial property owners, and the remaining 45% should be paid by residential property owners. (This amendment to the state constitution is called the Gallagher Amendment.)

Due to this requirement of the 55%–45% split, the residential assessment ratio must be adjusted each reassessment cycle, and in 2017, the Colorado Division of Property Taxation (DPT) issued a preliminary study indicating that the new residential assessment ratio will be 6.56%. However, adjusting the calculation for the oil and gas value contribution, the final residential assessment ratio has been set at 7.20% which equates to a 9.5% reduction in the ratio. This drop in the ratio is due to the amount of residential value increases relative to the amount of commercial value increases throughout the state of Colorado.

We are expecting the Colorado Legislature to approve this adjustment and place it in statute for the 2017 and 2018 tax years. This reduction in assessment ratio of approximately 9.5% (assuming a 7.2% assessment ratio) will partially offset the expected large increases in value for both multi-family owners (including senior living facilities) as well as single-family residential owners.